Netflix post-earnings performance: how original content investment drives growth

(AI summary)

Netflix: binge-worthy and bankable

Netflix remains a key player in the entertainment and streaming sector. Its vast content library and strong international growth have been crucial to its success. Heavy investment in original programming helps Netflix stay ahead of competitors like Disney+, Apple TV+, and Amazon Prime Video.

Its share price often experiences notable fluctuations following quarterly earnings announcements. This article analyses Netflix's historical share price movements from the third quarter (Q3) 2022 to the second quarter (Q2) 2024 following earnings announcements, offering valuable insights for investors and traders.

Key financials

Expectations for Q3 2024

• Revenue: $9.764 billion
• Revenue growth: 14% year-over-year (YoY)
• Net income: $2.234 billion
• Earnings per share (EPS): $5.11

Comparison to Q2 2024

Netflix exceeded Q2 2024 expectations as it added more global subscribers and saw strong growth in its advertising business. Growing its ad-supported memberships by 34% during Q2 2024 compared to Q2 2023.

• Revenue: $9.56 billion
• Revenue growth: 17% YoY
• Operating income: $2.6 billion
• EPS: $4.88

Post-earnings performance analysis

• Immediate reactions (one day)

The one-day movements after Netflix’s earnings typically reveal how the market reacts to the company’s ability to meet or beat expectations. In Q3 2022, the stock surged by 15%, likely due to strong earnings or positive outlooks. Similarly, in Q3 2023, the stock rose by about 20%. In contrast, other quarters like the first quarter (Q1) 2023 and Q1 2024 saw minimal or negative movement, indicating more subdued market reactions

• Short-term adjustments (one week)

The one-week performance reflects more measured market sentiment as investors absorb earnings results and management commentary. In Q3 2022, Netflix’s stock continued its upward trajectory, gaining over 30% after one week. Similarly, Q3 2023 saw a 25% rise, reflecting sustained optimism. However, in periods like Q2 2023 and Q1 2024, the stock experienced declines over the week, suggesting market concerns about future performance or macroeconomic factors

• Medium-term trends (one month)

The one-month post-earnings performance reveals whether initial stock price reactions hold over time. In Q3 2022, Netflix’s stock maintained its gains, with a 30% rise still evident after one month. However, in Q2 2023 and Q1 2024, the stock either reversed or stagnated, suggesting that early enthusiasm may not have translated into longer-term confidence

• Overall patterns

The chart shows that Netflix’s stock can experience significant volatility post-earnings. Some quarters, such as Q3 2022 and Q3 2023, saw strong one-day gains that persisted over the month, while other quarters, like Q2 2023 and Q1 2024, showed more modest or even negative movements, highlighting variability in market reactions

• Implications for investors

Investors should be mindful of the high volatility in Netflix’s stock following earnings reports. While positive surprises, as seen in Q3 2022 and Q3 2023, can lead to strong short-term gains, there is always the risk of corrections if long-term growth or guidance fails to meet expectations.

Netflix post-earnings performance chart